The Hidden 9% Income: Why I’m Choosing the “Riskiest” Dividend on the Board

Most income investors are chasing yield in the wrong direction. I screened 600+ stocks through Vulcan’s systematic filters last week, hunting for dividend durability in a market that’s forgotten what that word means. The four finalists that emerged told me something uncomfortable: the safest-looking yields might be the most dangerous, and the one flashing warning signs on every traditional screen might be the smartest income bet you can make today. Enterprise Products Partners at 6.8%. Verizon at 6.9%. Pfizer at 6.8%. Western Midstream Partners at 9.3%. Wall Street would tell you to grab Verizon and sleep well. I’m doing the opposite, and here’s exactly why. The Screening Funnel That Changed My Mind Before you dismiss this as yield-chasing madness, understand how we got here. The Vulcan systematic process isn’t about finding the highest number on a spreadsheet. It’s about finding sustainable cash flows that won’t evaporate when the cycle turns. Layer one eliminated the volatility traps: anything above the 30th percentile in one-year volatility got cut. Same with betas above 0.85. This isn’t a growth portfolio. It’s an income sleeve that needs to let you sleep. Layer two tackled valuation extremes. Forward P/E below 5 often signals distress masquerading as value. Above 22 means you’re paying growth multiples for income vehicles. We kept the band between 5 and 22, with EV/EBITDA between 4 and 11. Layer three hit the balance sheets. Debt-to-equity under 3.5. Interest coverage above 4x preferred. Altman Z above 0.8 to filter out the walking wounded. Piotroski F-Score of 5 or higher to ensure accounting quality. What emerged were four names with legitimately high yields and fundamental staying power. But the math told a different story than the headlines. The Four Finalists: A Tale of Hidden Risk Enterprise Products Partners carries a 6.8% yield with a 1.5x distributable cash flow coverage ratio. Thirty-two percent insider ownership. Interest coverage at 5.3x. On paper, it’s the sleep-well choice. The problem? At an EV/EBITDA of 9.8 and forward P/E of 11.2, you’re paying close to fair value for a midstream stalwart with limited upside torque. The distribution is safe, but you’re essentially buying a bond with partnership tax complications. Verizon offers 6.9% with the longest streak of consecutive dividend increases in this group. A 0.17 beta makes it the least market-sensitive option. But look closer: debt-to-equity at 1.6 with an Altman Z of just 1.3 puts it in the caution zone. The telecom industry is spending aggressively on 5G infrastructure with questionable return profiles. You’re getting paid to own a declining business model that’s levering up to stay relevant. Pfizer looks like the deep value play at 6.8% with a 37% margin of safety on our models. The lowest debt-to-equity in the group at 0.7. A Piotroski score of 7. But that 2025 guidance miss wasn’t a one-time stumble. The patent cliff on key drugs creates coverage uncertainty precisely when you need predictability. You’re buying potential at the cost of probability. Then there’s Western Midstream Partners at 9.3%. Why the “Risky” Choice Makes the Most Sense WES carries the highest leverage in the group: 2.3x debt-to-equity versus EPD’s 1.1x. Its payout ratio shows 105% on the Vulcan database, a figure that would send most income investors running. The Altman Z-score of 1.9 sits in the grey zone between comfortable and concerning. So why am I calling it the champion? Because the Vulcan database captures GAAP payout ratios, and WES is a partnership. What matters isn’t accounting earnings, it’s distributable cash flow. And here’s what the Q3 report actually said: Free Cash Flow after distributions remained positive. Management expects 2025 FCF to finish above the high end of their guidance range. Translation: the distribution isn’t just covered. It’s covered with room to spare, and the coverage is improving. At $39.07 per unit, WES yields 9.3%.